Category Archives: Supplier Management

SIM? Is It Old News or a Shiny New Pair of Shoes? Part I (Updated)

Supplier Information Management, also known as SIM (but which has almost nothing to do with your Subscriber Identity Module card in your cell phone, which is what you probably think of when you hear SIM), is not new. The early leader in this space, Aravo, which boasted the likes of GE and CISCO as clients, was formed in 2000 and followed not only by a slew of companies trying to be best of breed in SIM (including AECSoft, acquired by SciQuest which is now Jaggaer; Hiperos, now owed by Coupa; and Lavante; now owned by PRGX to name a few) but by a slew of suite vendors that began to implement enhanced SIM into their platforms (including Ariba, Iasta [now Determine], and Zycus).

And most of the basic features are now commodity. Try to find a vendor that sells SIM that doesn’t track all headquarter location, financial, core product, service, insurance, and third party risk information associated with a tier 1 supplier. Most of the good vendors also track third party credentials, compliance information against all relevant laws and directives, internal performance metrics and third party ratings, and even integration with third party supplier directories, databases, and or networks.

And the uses are well known.

  • Where are the bulk of my suppliers located?
  • What is the financial health (risk score) of my top 100 suppliers?
  • Are any of my products out of compliance with regulations in one or more countries?
  • Do all of my suppliers have their relevant insurance certificates up to date?
  • Who are my riskiest suppliers?
  • Have all of my suppliers verified their primary contacts in the last six months?

And the more mature companies, to try and maintain an edge, maintain their customer base, and expand into new companies and additional verticals have started to integrate additional, and related, functionality. Aravo evolved into a full Supplier Lifecycle Management solution that balanced compliance, performance, and risk management. Hiperos, before its acquisition by Opus Global and then Coupa, focussed on Third Party Management and on Compliance and Risk Management in particular. For example, their compliance management solutions included code of conduct, diversity management, insurance attestation, social accountability, and sustainability. Lavante focussed on on-boarding and integrating SIM with audit recovery services and advanced to the point where it was acquired by the leading audit recovery services provider, PRGX.

When all is said and done, SIM seems like a very mature space that is very old news. Typically when a technology gets to a point that all the suite vendors are just gobbling up what’s left, there’s nothing new. And betting on it definitely musters the image of an old gambler clutching dice in one hand and his last dollar in the other mumbling “baby needs a new pair of shoes“. But is it a bet you would lose?

Some Screening Questions to ask Prospective Strategic Suppliers

Before you select a strategic supplier, no matter how good their RFI looks, be sure to ask them some point blank questions that are critical to your business and judge the answers they give you (as well as their openness and directness in giving you these answers). Remember, you’re depending on them to serve your strategic customers so you need to be sure they can get it right.

Can we have a copy of your Code of Ethics, CSR Practices, and Privacy Policies?

If the vendor doesn’t have any of these, or won’t give it to you, sound all the sirens and run for the hills. No organization can afford a publicity disaster these days, and a supplier without good ethics (that it is willing to follow), good social responsibility (that it is willing to enforce), and good privacy (that enable it to comply with legislation like GDPR) is YOUR publicity disaster waiting to happen — and we all know what that does to your brand value!

Can you provide 3rd party proof that you live up to it?

It’s one thing to say you have an ethics/CSR/privacy policy, it’s another to follow it — and another yet to have true third party proof that you do. Make sure the vendor has certified CSR and Privacy ratings from trusted, true, third parties (and not from a small consortium of vendors that fund the certification agency) and can point to at least one situation where it terminated a business relationship with a client or supplier that was unwilling to operate in an acceptable, ethical, fashion.

Can we have a copy of your Quality Assurance Process?

If the vendor doesn’t have one, or won’t give it to you, then you need to ask yourself what kind of quality you can expect. (The answer is obvious: low!) Note that you may need a document for each distinct type of product you purchase.

What certifications do you have with regards to your Quality Assurance Process? ISO? ASQ? etc.

If the vendor doesn’t have any certifications, how much faith can you put into the process the vendor is using?

Can you provide references from current AND former clients who did business with you for at least 2 years?

Just like your customers ask you for references, if this supplier is going to be strategic, you need its references. And remember that you don’t want references who have been with the vendor less than a year because the blush is still on the rose and they will be full of peace and love for the vendor. You need a real review from an experienced customer who can tell you what’s good and not so good. No vendor is perfect, and if the not so good is not relevant to your business, then their imperfection is irrelevant. Plus, if customers’ left, why? Was it due to a change in business? Or poor performance? If the customer left for due to a change in business, and they still have a good reference for the former supplier, then that speaks volumes. If the customer left due to continuously poor performance, that also speaks volumes.

What is your dispute resolution process?

Face it, at some point, something is going to go wrong. Sh!t happens. How do they deal with it? And is it a process that you can deal with?

Do you understand our business? Explain!

If the supplier has never supplied a customer in your vertical, and you have special needs, this could be an issue. It could also be an issue if they have never supplied a customer with special needs in your vertical or you have considerably different requirements than the average company in your vertical. Make sure the vendor has a good understanding of who you are as a company by asking this open ended question.

Who are your top competitors? Why are you better for us?

Everyone has competitors. If they don’t, then they are misguided or selling a product or service no one needs. There are no Blue Oceans any more, just open oceans that are only sparsely sailed (by a few companies who are eager explorers). Make sure they give you a few real competitors as well as a good reason as to why they are better, as this will serve to not only enforce their answer to the previous question (and let you know if they really understand your business) but let you know that they have attempted to be honest in their assessment.

Is this everything you need to ask to make sure the supplier can be a strategic partner? No. But it’s a good start!

Supplier Solutions – All About the Space … (Repost)

… of Supplier Enablement. In our recent post about Supplier Networks, we discussed the value wasn’t what the provider typically promoted, but the fact that it greatly decreased the effort required by the supplier to do business. It enabled them to be efficient, whereas most sourcing and procurement applications just suck their time.

So if you are going to buy a supplier management solution, then it better be one that truly, truly, truly enables suppliers. So what does this mean?

Find a solution that focuses suppliers on missing, outlier, and information that can’t be confirmed.

Many solutions just send out regular “please review and correct” alerts and call that supplier information management. But information management isn’t about reminders and checking boxes, it’s about finding issues and fixing them. A good solution identifies missing information, information that is outlier from norms (i.e. an insurance certificate is usually only 1 year, but the supplier entered 10), and information that can’t be confirmed (such as third party audits from organizations that can’t be found in government registries).

Find a solution that makes integration with supplier’s systems (MRP, CRM, order management, etc.) easy.

Suppliers need to quickly get POs out of your portal and into their order management, MRP, ERP, accounts receivable, etc. system for which your vendor will likely not have an out-of-the-box integration solution that you are able to implement on behalf of your supplier. So make sure the solution has a well-defined API that makes it easy for the supplier to integrate their systems if they want to and well defined file formats that will allow them to export orders, etc. from your system and import shipping notices, invoices, etc. from theirs.

Find a solution that includes cash forecasting capability for the supplier based on your early payment discounting schedule.

Face it. A supplier isn’t going to go for your early payment discount program just because you say it’s a good idea — they need to run their own numbers and realize that 2% is less than they are paying in interest, etc. Give them an easy to use calculator, especially since their Procurement or AR guys are likely NOT as financially adept as your financial modellers.

In other words, if you want a true supplier solution, find one that truly, truly, truly enables the supplier. Not just you.

Supplier Management Is Not Enough. But Neither is Enablement. So What Is?

Very good question.

As per our post two years back on how it’s time to go beyond supplier management (which has been a thing every since Aravo burst onto the scene way back in 2003), supplier management is a lot more than just information tracking, performance metrics, and simple compliance requirements.

As per our last post, it’s also:

  • Corporate Social Responsibility (CSR)
  • Supplier Information Management (SIM)
  • Sustainability Initiatives
  • Supplier Development
  • Risk Management
  • Compliance

and

  • (Supplier) Contract Management
  • New Product Introduction
  • Maintenance, Repair and Operation (MRO)
  • Services and Service Management
  • (Supplier) Spend Analytics

but it doesn’t stop there. There’s also:

  • Supplier Discovery
  • Supplier Financing
  • Supplier Marketplaces
  • Supplier Networks
  • etc.

And then there’s the fact that the organization needs strategic and high performing suppliers, and most won’t make the cut until they are enabled. But just enabling a supplier to do better (one time) is not enough — you have to be able to take advantage of that enablement. Which means you have to be able to monitor, plan for, track, utilize, and respond to the changes made by the supplier. That requires a fairly advanced system.

And, as per our previous article, you need visibility (into the supplier and its supply chain); value-driven design (that produces a product a consumer wants); and verocity (for real time spend insight). But that’s not everything. You also need vetting (so that you can insure regulatory and compliance requirements are met); variability (as different suppliers require different levels of management and insight); and vindication (objective measurements over time that you made the right choice). And so on.

We still don’t have the answer, but we do know that the platform must be more than just information management, checkbox tracking, and messaging with audit trails. It must be collaborative, open, flexible, and evolving. Then, maybe in a few years, we’ll have a better idea of what the right answer is really is.

When Managing Supply Assets, Don’t Forget …

Last year we brought up a very important point when managing supply. Specifically, we reminded you that sometimes supply comes from within the four (virtual) walls of your business — a fact that is often overlooked by man BoB (Best-of-Breed) S2P (Source-to-Pay) modules and even suites.

When we are talking about MRO, the goods and services you need might be in a storage room in another building. If we are talking about consumables, like what you might need for a new hire, everything you need might be one floor down, left behind by another hire who, after the probation period, didn’t work out. As a result, inventory and asset management are key to successful Supply Management, and to successful Procurement.

But Asset Management is more than just keeping track of assets, moving them from one location to another, and making sure employees choose existing assets in inventory before ordering new assets from suppliers.

Asset Management is not just tracking assets and deploying them when they are needed, it is making sure they are used when they are usable. Assets have a value, a value that almost always depreciates when they are not used. Add this to the extra cost of having them in inventory, and that’s a lot of wasted capital.

In other words, good asset management requires a platform that can

  • track and improve forecasts … especially if demand or utilization timeframes start to shift
  • optimally manage inventory levels … there should be enough to last to the next, optimal, restock window with a bit of buffer, but not so much that the excess inventory grows at every restock
  • re-assign internal assets that should be utilized as fast as possible, and even allow for internal upgrades to delay unnecessary spending (e.g. the new machine bought for a new hire that didn’t work out after 3 months should be reassigned to an engineer 3 months away from a hardware upgrade)
  • manage leasing of assets that are going to go unused for a while (e.g. the organization has an expensive piece of construction equipment that it will not use for the next three months — lease it out)
  • identify when extra inventory or newly retired assets should be sold off to minimize loss

… or at least integrate with a platform that does.

Asset management is frequently overlooked, but very important to successful supply management.